National Stores on Monday announced it has filed for Chapter 11 protection in the United States Bankruptcy Court for the District of Delaware and has plans to restructure its business.
The company, owner of Fallas, Fallas Paredes, Fallas Discount Stores, Factory 2-U, Anna's Linen's by Fallas, and Falas (spelled with single "l" in Puerto Rico), said in a press release that it "has ample liquidity to fund operations and has received a commitment for up to approximately $108 million in debtor-in-possession financing from its existing lenders." The company didn't immediately respond to a request for additional comment.
Iconic San Francisco department store Gump’s also recently filed for bankruptcy protection in Nevada, according to court filings. The company didn’t immediately return Retail Dive’s request for more details.
Fitch analysts last week noted that the loan default rate for the retail industry in July was the lowest since June last year and down 7% from June this year, after peaking in April. (That includes both bankruptcy and distressed transactions with creditors.) That’s thanks in part to a healthy economy and a level of consumer confidence that is lifting many retail boats. But many retailers continue to struggle under mounds of debt, and those that have neglected or have been hampered in their efforts to improve operations in the e-commerce era are still struggling.
For its part, National Stores said it has suffered financial setbacks from certain underperforming stores, exacerbated by severe weather in various regions, including by Hurricane Maria, resulting in "prolonged, temporary closure of damaged stores and loss of revenue." The company said it also suffered further financial losses from its acquisition of Conway Stores and from a data breach, according to its release.
But the company plans to use its bankruptcy court-protected reorganization for a comeback, CEO Michael Fallas said in a statement.
"National Stores, historically a profitable company, is committed to improving its financial health and returning to profitability," he said. “Our goal is to emerge a reorganized Company poised to compete in an evolving industry so that we can continue to serve the communities where we are rooted.”
The future of Gump’s is less clear. In May, Gump's CEO Michael Mosca said, "[W]e have reached the point at which an infusion of capital is essential to preserve Gump’s as we know it, and to grow the company in a fast-changing retailing environment by building on its many outstanding attributes,” according to a press release. The storied upscale retailer, founded in 1861 during the height of the Gold Rush and a survivor of the great earthquake of 1906 (and later of 1989), is in search of a buyer, but in order to meet some of its financial obligations, it has hired liquidators to sell off merchandise, Bloomberg reported.